Harrison price four times recent coal-fired plant transactions - Beckley, Bluefield & Lewisburg News, Weather, Sports

Harrison price four times recent coal-fired plant transactions

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Comparison shopping may be instructive in Mon Power's petition to buy the Harrison coal-fired power station from sister FirstEnergy subsidiary Allegheny Energy  Supply.

The utility, which serves its own and Potomac Edison ratepayers in northern and eastern parts of West Virginia, proposed to the Public Service Commission of West Virginia in November to buy the 80 percent it does not own of Harrison in a transaction that amounts to $1.2 billion.

Full ownership of the Harrison facility is the best of all possible options for meeting future customer demand, and the proposed price is fair, the utility asserts. It provided a consultant's analysis  that some argue is incomplete and skewed.

The proposed price is based on the value of the plant on AE Supply's books.

But three recent sales of supercritical coal-fired plants give another view. The sales were referenced near the end of direct testimony filed in the case by engineer and industry consultant David Schlissel on behalf of intervenors the West Virginia Citizen Action Group and the Sierra Club.

Schlissel found that the proposed price for Harrison came in far higher than the recent transactions: $767 per kilowatt of generation capacity, compared with averages for the three transactions of $130/kW to $181/kW.

In August, Exelon Corp. sold three Maryland power plants — the 1980s-vintage Brandon Shores, a coal-fired plant, along with coal- and oil-fired units at the 1960s C.P. Crane plant and coal-, natural gas-, and oil-fired units at the 1960s H.A. Wagner plant — to Riverstone Holdings for an average of $177/kW, Schlissel said.

In March, Ameren sold five coal-fired power stations in Illinois to Dynegy: Joppa, dating to the 1950s; Coffeen and Edwards, from the 1960s and early 1970s; and Duck Creek and Newton, from the 1970s and 1980s. The transaction came to $181/kW, according to Schlissel.

Also in March, Dominion sold three power stations to Energy Capital Partners. With one gas-fired station, those included the Brayton Point Power Station in Massachusetts, with three coal units and one fired by oil or natural gas, and the coal-fired Kincaid Power Station dating to the 1960s and located in Illinois. The average for the coal units was $130/kW, Schlissel said.

Dominion recently had invested $1 billion in environmental controls at Brayton Point, but wrote off a large part of that investment.

"The forecast for Brayton Point is indicative of what's happening all over the country," said Tom Sanzillo, who co-authored an analysis with Schlissel of the challenging conditions for Brayton Point and other coal-fired power plants, including persistently cheap natural gas and new and anticipated environmental regulations. "We are seeing the owners of these 50-year-old coal-burning facilities facing do-or-die decisions about their futures, with hundreds having already announced their plans to retire in the next few years and more going that route every month."

These units range widely in their characteristics.

Harrison's units are 40 years old, and the plant already has the expensive scrubbers for compliance with sulfur dioxide emissions standards. These units that have changed hands recently range from 22 to 60 years old and some do and others don't have sulfur dioxide controls.

Harrison, located in West Virginia adjacent to its main supplier of coal, burns a local fuel; these plants, located from Massachusetts to Illinois, must deal with a variety of coal supply situations.

But Schlissel did not believe the differences between Harrison and these plants are as great as the proposal would suggest.

"The companies' proposed price for the Harrison plant in the (generation resource transaction) is more than four times higher than the price paid in any of these recent transactions," he wrote in his testimony. "This strongly suggests that Allegheny Energy Supply would not be able to receive $767/kW if it attempted to sell Harrison to a non-affiliated company."

Rebuttal testimony in the case on the proposed transaction is due May 17 and the evidentiary hearing will take place May 29-31 in Charleston.

Case documents may be accessed on the PSC's website; search for, or subscribe to, docket number 12-1571.